China has now become the world’s largest video game market. But console-makers are yet to colonise it. The overwhelming majority of Chinese gaming takes place on smartphones, tablets, or PCs. For anyone who knows anything about gaming, that implies one thing: there is a massive pool of players who could shift from “casual” to “serious” gaming, and they’re relatively untapped – the first console sold in China was the PS4, which gained regulatory approval in 2015. Now, industry giant Nintendo has partnered with Chinese tech titan Tencent to remedy that situation.
Major hurdles in China’s regulatory structure over video games has depressed Tencent’s share price this year – but it’s still up by 9% year to date
Source: Yahoo Finance
The partnership was announced in April, when Tencent won approval to start selling Nintendo’s Switch console in Guangdong. There are still various layers of regulatory approval to navigate, and it’s not yet known when, where, or for how much, Switch will start retailing – but there’s no doubt it’s coming to China. At a press event earlier this month (at the Shanghai-based ChinaJoy gaming conference), the two companies started outlining their release strategy.
Here’s what we’ve gleaned about the relationship so far. Tencent will provide cloud services and servers for Switch’s online platform in China. It will also be responsible for “localising” Nintendo’s games into simplified Chinese, and Switch’s eShop will include the ability to pay for games with Tencent’s hugely popular WeChat payment system. We know that some of Switch’s biggest blockbusters – Super Mario Odyssey, and The Legend of Zelda: Breath of the Wild – are amongst the first games slated for a Chinese release.
Tencent is the perfect partner for Nintendo. Not only does it have the kind of end-to-end portfolio of products (like digital payment methods and cloud computing offerings) that Nintendo needs straight away, but the company is also no stranger to video games (it’s a major investor in western game companies like Riot and Epic, as well as the company behind world-leading mobile games like Honour of Kings). Add to that it’s status as a social media giant, and Tencent looks perfectly positioned to help Nintendo get ahead on all channels.
Disclosure
Dominion holds Tencent in its Global Trends Ecommerce Fund.
Author: Theo Leworthy
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